Prequalification vs Preapproval: Here’s the difference
Today’s market is especially challenging so having knowledge of the industry is key to getting the right home on the best terms. When buying a new home, you may need to go through both the prequalification and preapproval processes. But be aware, they are not the same thing.
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Some of the changes taking place in real estate deal with home financing. In the past, a perspective homebuyer found the house and then searched for a mortgage. Now, the buyer must begin the mortgage process first.
Prequalification
The prequalification is a quick process that must be accomplished before you go house hunting. It can be completed online with the decision being given in as little as 1 hour, depending on the lender. A prequalification gives the homebuyer an estimate of how much house they can afford. Armed with this knowledge, the buyer and agent can find a house in the right price range. Most real estate agents won’t even show properties unless the buyer has been prequalified.
Preapproval
The preapproval is an offer to lend the buyer a specific amount (but is not a commitment). The buyer must supply more information so the process takes more time. Once all necessary information has been reviewed, a preapproval letter may be issued in about 10 business days.
A preapproval letter, which is valid for 90 days, must be submitted with an offer to buy a home. It shows sellers that the buyer is serious and able to secure a mortgage, making it more likely that the home purchase will be completed. This distinction is invaluable in a competitive real estate market.
Prequalification
Income Information
Credit Check
Basic information about bank accounts
Down payment amount & desired mortgage amount
no tax information required
Preapproval
Copies of paystubs showing income for the past 30 days
Credit Check
Bank statements for the past 2 months
Down payment amount & desired mortgage amount
Personal & business tax returns and W2 statements for the past 2 years
Which is right for you?
A prequalification is helpful to homebuyers who are new to the housing market and may be unsure about how much they can afford. A preapproval is helpful to the buyer in a competitive market who wants to stand apart from other buyers. For more details, see your local mortgage broker or banker for a product that will work for you.
Learn the difference between the prequalification and preapproval processes so that you can be purchase ready for your new home!
A preapproval letter, which is valid for 90 days, must be submitted with an offer to buy a home. It shows sellers that the buyer is serious and able to secure a mortgage, making it more likely that the home purchase will be completed. This distinction is invaluable in a competitive real estate market.
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Naypeer Property Ventures, LLC is a real estate company licensed by the state of New York and abides by equal housing opportunity laws. License number 10401346647. All material presented herein is intended for informational purposes only. Information is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. All measurements and square footages are approximate. Nothing herein shall be construed as legal, financial or other professional advice outside the realm of real estate.
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